Dr. Michael Freytag, Chairman of the Board of Schufa Holding AG, on reliability in forecasts, handling customer data and how Schufa is preparing against new competitors. An interview.
Prof. Dr. Hans-Christian Riekhof: Schufa provides a fairly quick and unnoticed credit check by the customer in the case of positive results during online purchases. How much time does Schufa have for this, and how do the credit checks succeed with such extremely high reliability?
Dr. Freytag: Indeed, the reliability of the forecasts – also referred to as discriminatory power – is a particular strength of SCHUFA. This is also reflected in the high repayment rate of consumer loans that we have recorded. It is at 97.8 percent, the highest level in the past ten years. With our work, we contribute to making the credit system in Germany safer and at the same time simpler. We process around the clock over 380,000 inquiries and reports per day – each in less than a second.
Prof. Riekhof: Schufa emphasizes that it basically achieves a very high hit rate in credit checks with relatively few data sets. Why is it that Schufa obviously does not rely on “Big Data”?
Dr. Freytag: On the one hand, due to our business model – the principle of reciprocity – we have a particularly qualified data pool with information on almost all economically active consumers. This data pool contains credit-relevant information such as accounts, credit cards, ongoing loans but also payment disruptions. Important: we have exclusively positive information about over 90 percent of the people stored with us. And we have proven competence in the development of sharp scorecards.
Prof. Riekhof: Schufa has been in business for 90 years and has recently been confronted with new competitors who develop credit scores and offer credit checks based on online available customer-related data. What kind of data do these competitors actually use? Are there legal limits or gray areas? And can Schufa permanently assert itself against these competitors?
Dr. Freytag: SCHUFA has stood for trust for 90 years. Trust must be constantly confirmed. The more digital our world becomes, the more opportunities there will be to calculate forecasts based on data. Our business model is based on transparency and will remain so. All customers can see what is stored about them with us. We already provide precise forecasts based on economic information. We do not collect data behind the backs of consumers. We do not invade privacy. The legislator has also drawn clear boundaries here. But for me it is also a question of my own attitude. I am convinced that the companies that customers and the public trust will prevail in the market. Action oriented towards values and attitude is an indispensable prerequisite for this.
Prof. Riekhof: What do you see as the decisive competitive advantage of Schufa against these new competitors?
Dr. Freytag: SCHUFA stands for lived quality and reliability “made in Germany”. Our brand enjoys great trust from our customers. Another factor is our broad and stable foundation: We have a business that has grown over many decades in the areas of credit economy, real estate economy, telecommunications and utilities as well as debt management. We are also growing in our growth markets of retail, mail order, e-commerce and the insurance industry. Another pillar is the B2B sector. We have invested a lot in it and now deliver a new quality in the market for business information. Last but not least, the private customer business is enjoying continuous growth. In addition to our 9000 corporate customers, over 2 million consumers now trust our products around transparency, information and fraud protection. We are economically successful. This means that we have the opportunity to invest in our future from our own resources. Of course, our employees with their excellent skills and mentality are crucial: they are professionals and do not rest on their success, but continuously develop new solutions and technologies that will help our customers meet the challenges of digitization.
Prof. Riekhof: A technologically quite interesting idea is to transfer the management of one’s own personal data to a databot, which then administers the access of authorized third parties to all one’s own online available data according to defined rules. For example, tax authorities would then be allowed to access certain personal data, and the tax return would be approved by the citizen with a mouse click. Google or Facebook would then only be allowed to use specific released data. How do you assess the future chances of such a solution – is it realistic and feasible?
Dr. Freytag: Great inventiveness is one of the hallmarks of the digital world. But not every idea is a success. Basically, we Germans are considered to be those in Europe who take data protection particularly seriously. Other countries – especially outside Europe – are less alert than we are. Against this background, we observe two trends. On the one hand, consumers are willing to give up their very personal data if they receive a comprehensible service, i.e. a noticeable added value, in return. Personal purchase data for discount, for example. On the other hand, consumers demand “data sovereignty”. That means they are willing to give data, but at the same time want to remain master of this data and its further distribution. They want to manage their data and decide who can see and use what or not. Whether people leave these important questions and control to a bot, I cannot answer today. I would rather entrust my data to SCHUFA. It’s simply a matter of trust!
Prof. Riekhof: On the other hand, the Internet also creates completely new forms of criminality, such as identity theft. How great is the danger today that emanates from this type of crime, and how can private individuals protect themselves here?
Dr. Freytag: In addition to many opportunities, there are also downsides to the digital world. Cybercrime poses a major challenge. The damage caused by fraud in e-commerce alone amounts to over 2.5 billion euros. A particular problem is the identity theft you mentioned, or the misuse of identities for the purpose of fraud. According to a representative study commissioned by us, one in ten of the consumers surveyed has already had the experience of third parties buying goods on the Internet in his name! We are intensively dealing with the topic and already offer various solutions for business and consumers. In particular for e-commerce companies, we assess the probability of fraud of the end device used for an order with DeviceSecure. With the SCHUFA FraudPool, we offer credit institutions a solution for the data protection-compliant exchange of information on suspected fraud cases. Consumers can be informed by our UpdateService by email or SMS when inquiries about their person are received and thus detect fraudulent activities early. The SCHUFA IdentSafe searches for data published without permission on the publicly accessible Internet and helps with the cleanup. People who have already been victims of identity fraud can register with us free of charge as victims of identity fraud in order to better protect themselves against repeat fraud. Meanwhile, public authorities and offices also point out our service. Schufa creates the trust for uncomplicated and secure business transactions and helps companies and consumers fight data misuse. Prof. Dr. Hans-Christian Riekhof: Thank you very much for the interview!
